China’s ZTE Under Investigation in Nigerian Security Network Failure

Chinese investment across the developing world has been a source of angst for U.S. business watchers over the past decade— a symbol of China’s growing global reach, and a tally of what can look like missed opportunities. But the story of one major project’s descent from friendly photo-ops to acrimony and legislative hearings shows that those investment efforts often don’t match the hype (or anxiety) surrounding them.

In 2010, Nigeria contracted China’s ZTE Corporation to install a security communications network. The project included closed-circuit cameras intended to improve anti-terror monitoring in Abuja and Lagos, where attacks from groups like Boko Haram are a looming daily threat. But six years later, the $470 million National Public Security Communication System has come to next to nothing, with the system incomplete and effectively mothballed. Terror attacks and crime have continued, unmonitored.

In late January, a Nigerian congressional panel began hearings to determine what turned the half-billion dollar effort into a boondoggle of exploding batteries and cameras that see nothing. They heard he said-she said testimony faulting, on the one hand, slipshod work by ZTE, and on the other, government refusal to fund and maintain the system.

Though no official findings have yet emerged, the Nigerian media have pointed fingers at Nigerian leadership who both neglected due diligence and covered up evidence of substandard work and missing supplies for years. The government’s agreement with ZTE was reached without a competitive bidding process, and reportedly contained language prohibiting public discussion of many aspects of the project. (ZTE did not respond to Fortune’s request for comment on this story.)

According to Ed Marsh, a consultant who helps global companies work in Africa, the CCTV scandal shows how corruption has hampered Nigeria’s efforts to upgrade unreliable roads, power grids, and data services.

“Up to this point, with very few exceptions,” says Marsh, “The money that has been putatively earmarked for infrastructure has been squandered. There’s often [just] enough [built] to provide plausible deniability.”

Nigeria is Africa’s biggest economy, with a growing middle class, booming film industry (known as Nollywood), and a promising tech sector. It’s a place, Marsh attests, that many major companies would like to operate—if the wires and roads were more reliable. Marsh describes inconsistent power making basic computing difficult, even in high-end urban hotels. Many Nigerians carry multiple cell phones, because any one provider’s towers might go out unexpectedly. Both urban and rural transportation systems are chaotic and decrepit.

For a time, it seemed like Chinese investment could be the answer. But Nigeria’s security system isn’t the only case in which that dream has gone sour. A Chinese-built hospital in Angola developed serious structural problems only four years after construction, and a Zambian road crumbled just as quickly. Huawei was convicted of bribery in connection with a telecom project in Algeria, and banned from bidding on contracts there for two years. Chinese firms have also been banned from bidding on World Bank projects because of corrupt practices.

There’s a dangerous synergy, it seems, between some African countries’ own endemic corruption and a Chinese business culture that, the Economist writes, “cares little about rules and regulations.” Both systemic corruption and the collapse of substandard roads and buildings are as common on mainland China as they are in Africa. Strict U.S. laws against engaging in corruption abroad are part of why U.S. companies have been slower to do business on the continent.

For more on tech investment in Africa, watch our video.

Despite that spotty track record, it seems Africa just can’t quit China, largely because many Chinese projects in Africa are funded by large loans from China’s Export-Import (Exim) Bank. Chinese Exim funds have at times exceeded those of the World Bank, and can be simply irresistible to cash-strapped developing nations.

“African governments have no money for telecom projects and so China is using its financial muscle to get the contracts through loans,” Amos Kalunga, an analyst for the Computer Society of Zambia, told PC Advisor. The Nigerian CCTV project was backed by a Chinese Exim loan.

But Marsh says that Nigeria’s ambitious urbanites are beginning to demand a higher standard for infrastructure projects and oversight, because they know development is crucial to their global future.

The most concrete sign of this sentiment is the election last March of President Muhammadu Buhari, who has a strong reputation for honesty (literally strong—he was briefly the nation’s military dictator in the mid-‘80s) and has kicked off a broad anticorruption initiative. The findings of the ZTE inquiry may become an early measure of Buhari’s effectiveness at changing the game.

Chinese investment across the developing world has been a source of angst for U.S. business watchers over the past decade— a symbol of China’s growing global reach, and a tally of what can look like missed opportunities. But the story of one major project’s descent from friendly photo-ops to acrimony and legislative hearings shows that those investment efforts often don’t match the hype (or anxiety) surrounding them.

In 2010, Nigeria contracted China’s ZTE Corporation to install a security communications network. The project included closed-circuit cameras intended to improve anti-terror monitoring in Abuja and Lagos, where attacks from groups like Boko Haram are a looming daily threat. But six years later, the $470 million National Public Security Communication System has come to next to nothing, with the system incomplete and effectively mothballed. Terror attacks and crime have continued, unmonitored.

In late January, a Nigerian congressional panel began hearings to determine what turned the half-billion dollar effort into a boondoggle of exploding batteries and cameras that see nothing. They heard he said-she said testimony faulting, on the one hand, slipshod work by ZTE, and on the other, government refusal to fund and maintain the system.

Though no official findings have yet emerged, the Nigerian media have pointed fingers at Nigerian leadership who both neglected due diligence and covered up evidence of substandard work and missing supplies for years. The government’s agreement with ZTE was reached without a competitive bidding process, and reportedly contained language prohibiting public discussion of many aspects of the project. (ZTE did not respond to Fortune’s request for comment on this story.)

According to Ed Marsh, a consultant who helps global companies work in Africa, the CCTV scandal shows how corruption has hampered Nigeria’s efforts to upgrade unreliable roads, power grids, and data services.

“Up to this point, with very few exceptions,” says Marsh, “The money that has been putatively earmarked for infrastructure has been squandered. There’s often [just] enough [built] to provide plausible deniability.”

Nigeria is Africa’s biggest economy, with a growing middle class, booming film industry (known as Nollywood), and a promising tech sector. It’s a place, Marsh attests, that many major companies would like to operate—if the wires and roads were more reliable. Marsh describes inconsistent power making basic computing difficult, even in high-end urban hotels. Many Nigerians carry multiple cell phones, because any one provider’s towers might go out unexpectedly. Both urban and rural transportation systems are chaotic and decrepit.

For a time, it seemed like Chinese investment could be the answer. But Nigeria’s security system isn’t the only case in which that dream has gone sour. A Chinese-built hospital in Angola developed serious structural problems only four years after construction, and a Zambian road crumbled just as quickly. Huawei was convicted of bribery in connection with a telecom project in Algeria, and banned from bidding on contracts there for two years. Chinese firms have also been banned from bidding on World Bank projects because of corrupt practices.

There’s a dangerous synergy, it seems, between some African countries’ own endemic corruption and a Chinese business culture that, the Economist writes, “cares little about rules and regulations.” Both systemic corruption and the collapse of substandard roads and buildings are as common on mainland China as they are in Africa. Strict U.S. laws against engaging in corruption abroad are part of why U.S. companies have been slower to do business on the continent.

For more on tech investment in Africa, watch our video.

Despite that spotty track record, it seems Africa just can’t quit China, largely because many Chinese projects in Africa are funded by large loans from China’s Export-Import (Exim) Bank. Chinese Exim funds have at times exceeded those of the World Bank, and can be simply irresistible to cash-strapped developing nations.

“African governments have no money for telecom projects and so China is using its financial muscle to get the contracts through loans,” Amos Kalunga, an analyst for the Computer Society of Zambia, told PC Advisor. The Nigerian CCTV project was backed by a Chinese Exim loan.

But Marsh says that Nigeria’s ambitious urbanites are beginning to demand a higher standard for infrastructure projects and oversight, because they know development is crucial to their global future.

The most concrete sign of this sentiment is the election last March of President Muhammadu Buhari, who has a strong reputation for honesty (literally strong—he was briefly the nation’s military dictator in the mid-‘80s) and has kicked off a broad anticorruption initiative. The findings of the ZTE inquiry may become an early measure of Buhari’s effectiveness at changing the game.